FOR INSTRUCTOR USE ONLY

FOR INSTRUCTOR USE ONLY

CHAPTER 2

A FURTHER LOOK AT FINANCIAL STATEMENTS

SUMMARY OF QUESTIONS BY LEARNING OBJECTIVE AND BLOOM’S TAXONOMY

Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT True-False Statements

1. 1 K 12. 2 K 23. 2 K 34. 3 K 45. 3 K

2. 1 K 13. 2 K 24. 2 K 35. 3 C 46. 3 K

3. 1 K 14. 2 K 25. 2 C 36. 3 K 47. 3 K

4. 1 K 15. 2 K 26. 3 K 37. 3 K 48. 3 K

5. 1 C 16. 2 C 27. 3 K 38. 3 C 49. 3 K

6. 1 K 17. 2 K 28. 3 K 39. 3 K 50. 3 K

7. 1 C 18. 2 K 29. 3 K 40. 3 K 51. 3 K

8. 2 K 19. 2 K 30. 3 K 41. 3 K 52. 3 K

9. 2 C 20. 2 K 31. 3 K 42. 3 K 53. 3 K

10. 2 K 21. 2 K 32. 3 C 43. 3 K 54. 3 K

11. 2 K 22. 2 K 33. 3 K 44. 3 K 55. 3 K

Multiple Choice Questions

56. 1 K 84. 2 AP 112. 2 C 140. 2 AP 168. 3 K

57. 1 K 85. 1 AP 113. 2 K 141. 2 AP 169. 3 C

58. 1 K 86. 1 AP 114. 2 K 142. 2 AN 170. 3 C

59. 1 K 87. 1 AP 115. 1 AP 143. 2 AP 171. 3 C

60. 1 K 88. 1 AP 116. 2 AP 144. 2 AP 172. 3 C

61. 1 K 89. 1 AP 117. 2 AP 145. 2 C 173. 3 K

62. 1 K 90. 2 AP 118. 2 AP 146. 3 K 174. 3 C

63. 1 K 91. 2 AP 119. 2 AP 147. 3 K 175. 3 C

64. 1 K 92. 2 K 120. 2 AP 148. 3 K 176. 3 K

65. 1 K 93. 2 AP 121. 2 AP 149. 3 K 177. 3 K

66. 1 K 94. 2 AP 122. 2 AP 150. 3 K 178. 3 K

67. 1 K 95. 2 K 123. 2 AP 151. 3 K 179. 3 K

68. 1 K 96. 2 K 124. 2 AP 152. 3 K 180. 3 C

69. 1 K 97. 2 C 125. 2 K 153. 3 K 181. 3 K

70. 1 K 98. 2 K 126. 2 K 154. 3 K 182. 3 K

71. 1 K 99. 2 AN 127. 2 K 155. 3 K 183. 3 K

72. 1 AP 100. 2 AN 128. 2 C 156. 3 K 184. 3 K

73. 1 K 101. 2 AP 129. 2 C 157. 3 K 185. 3 K

74. 2 K 102. 2 AN 130. 2 C 158. 3 K 186. 3 C

75. 1 AP 103. 2 K 131. 2 C 159. 3 K 187. 3 C

76. 1 AP 104. 2 K 132. 2 AP 160. 3 K 188. 3 K

77. 1 AP 105. 2 K 133. 2 AP 161. 3 K 189. 3 K

78. 2 AP 106. 2 C 134. 2 AP 162. 3 K 190. 3 C

79. 2 AP 107. 2 K 135. 2 AP 163. 3 K 191. 3 C

80. 1 AP 108. 2 K 136. 2 K 164. 3 K 192. 3 C

81. 1 AP 109. 2 K 137. 2 K 165. 3 C

82. 1 AP 110. 2 K 138. 2 K 166. 3 C

83. 2 AP 111. 2 C 139. 2 K 167. 3 C

Accounting Tools for Business Decision Making 6th Edition Kimmel Test Bank Visit TestBankDeal.com to get complete for all chapters

Test Bank for Accounting: Tools for Business Decision Making, Sixth Edition

FOR INSTRUCTOR USE ONLY

2-2 Brief Exercises

193. 1 AP 195. 2 AP 197. 3 K 199. 3 C 201. 3 K

194. 2 AP 196. 3 K 198. 3 C 200. 3 C

Exercises

202. 1 AP 206. 1, 2 AP 210. 2 AP 214. 2 K

203. 1 K 207. 1 AP 211. 2 AP 215. 2 AP

204. 1. AP 208. 1 AP 212. 2 AP 216. 2 AP

205. 1, 2 AP 209. 2 AP 213. 2 AN 217. 2 AN

Completion Statements

218. 3 K 220. 3 K 222. 2 K 224. 2 K 225. 2 K

219. 3 K 221. 3 K 223. 1 K

Matching

226. 1-3 K

Short Answer Essay

227. 1 K 230. 2 C 233. 3 C 236. 2 E 237. 3 E

228. 2, K 231. 3 C 234. 3 K

229. 1, 2 K 232. 3 C 235. 3 K

SUMMARY OF LEARNING OBJECTIVES BY QUE STION TYPE

Learning Objective 1 Item Type Item Type Item Type Item Type Item Type Item Type

1. TF 58. MC 67. MC 77. MC 115. MC 223. CS

• TF 59. MC 68. MC 80. MC 193. BE 226. Ma
• TF 60. MC 69. MC 81. MC 202. Ex 227. SA
• TF 61. MC 70. MC 82. MC 203. Ex 229. SA
• TF 62. MC 71. MC 85. MC 204. Ex
• TF 63. MC 72. MC 86. MC 205. Ex
• TF 64. MC 73. MC 87. MC 206. Ex
• MC 65. MC 75. MC 88. MC 207. Ex
• MC 66. MC 76. MC 89. MC 208. Ex

Learning Objective 2 Item Type Item Type Item Type Item Type Item Type Item Type

• TF 25. TF 101. MC 119. MC 136. MC 212. Ex
• TF 74. MC 102. MC 120. MC 137. MC 213. Ex
• TF 78. MC 103. MC 121. MC 138. MC 214. Ex
• TF 79. MC 104. MC 122. MC 139. MC 215. Ex
• TF 83. MC 105. MC 123. MC 140. MC 216. Ex
• TF 84. MC 106. MC 124. MC 141. MC 217. Ex

14. TF 90. MC 107. MC 125. MC 142. MC 222. CS

15. TF 91. MC 108. MC 126. MC 143. MC 224. CS

16. TF 92. MC 109. MC 127. MC 144. MC 225. CS

17. TF 93. MC 110. MC 128. MC 145. MC 228. SA

18. TF 94. MC 111. MC 129. MC 194. BE 229. SA

19. TF 95. MC 112. MC 130. MC 195. BE 230. SA

• TF 96. MC 113. MC 131. MC 205. Ex 236 SA
• TF 97. MC 114. MC 132. MC 206. Ex
• TF 98. MC 116. MC 133. MC 209. Ex
• TF 99. MC 117. MC 134. MC 210. Ex
• TF 100. MC 118. MC 135. MC 211. Ex

A Further Look at Financial Statements

FOR INSTRUCTOR USE ONLY

2-3

Learning Objective 3 Item Type Item Type Item Type Item Type Item Type Item Type

26. TF 43. TF 150. MC 167. MC 184. MC 220. CS

27. TF 44. TF 151. MC 168. MC 185. MC 221. CS

• TF 44. TF 152. MC 169. MC 186. MC 226. Ma

29. TF 45. TF 153. MC 170. MC 187. MC 231. SA

30. TF 47. TF 154. MC 171. MC 188. MC 232. SA

31. TF 48. TF 155. MC 172. MC 189. MC 233. SA

32. TF 49. TF 156. MC 173. MC 190. MC 234. SA

33. TF 50. TF 157. MC 174. MC 191. MC 235. SA

34. TF 51. TF 158. MC 175. MC 192. MC 237. SA

35. TF 52. TF 159. MC 176. MC 196. BE

36. TF 53. TF 160. MC 177. MC 197. BE

37. TF 54. TF 161. MC 178. MC 198. BE

38. TF 55. TF 162. MC 179. MC 199. BE

39. TF 146. MC 163. MC 180. MC 200. BE

40. TF 147. MC 164. MC 181. MC 201. BE

41. TF 148. MC 165. MC 182. MC 218. CS

42. TF 149. MC 166. MC 183. MC 219. CS

Note: TF = True-False C = Completion

MC = Multiple Choice Ex = Exercise Ma = Matching SA = Short Answer Essay

Test Bank for Accounting: Tools for Business Decision Making, Sixth Edition

FOR INSTRUCTOR USE ONLY

2-4

CHAPTER LEARNING OBJECTIVES

• Identify the sections of a classified balance sheet. In a classified balance sheet,

companies classify assets as current assets; long-term investments; property, plant, and equipment; and intangibles. They classify liabilities as either current or long-term. A stockholders’ equity section shows common stock and retained earnings.

• Use ratios to evaluate a company’s profitability, liquidity, and solvency. Ratio analysis

expresses the relationship among selected items of financial statements data. Profitability ratios, such as earnings per share (EPS), measure aspects of the operating success of a company for a given period of time.Liquidity ratios, such as the current ratio, measure the short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. Solvency ratios, such as the debt to assets ratio, measure the ability of a company to survive over a long period.Free cash flow indicates a company’s ability to generate cash from operations that is sufficient to pay debts, acquire assets, and distribute dividends.

• Discuss financial reporting concepts. Generally accepted accounting principles are a set

of rules and practices recognized as a general guide for financial reporting purposes. The basic objective of financial reporting is to provide information that is useful for decision making.To be judged useful, information should have the primary characteristics of relevance and faithful representation. In addition, useful information is comparable, consistency, verifiable, timely, and understandable.The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money. The economic entity assumption states that economic events can be identified with a particular unit of accountability. The periodicity assumption states that the economic life of a business can be divided into artificial time periods and that meaningful accounting reports can be prepared for each period. The going concern assumption states that the company will continue in operation long enough to carry out its existing objectives and commitments.The historical cost principle states that the companies should record assets at their cost. The fair value principle indicates that assets and liabilities should be reported at fair value. The full disclosure principle requires that companies disclose circumstances and events that matter to financial statement users.The cost constraint weighs the cost that companies incur to provide a type of information against its benefit to financial statement users.